Daijiworld Media Network – Mumbai
Mumbai, May 27: The rupee depreciated by 8 paise to 95.78 against the US dollar in early trade on Wednesday as elevated crude oil prices and rising geopolitical tensions in West Asia weighed on market sentiment.
Forex traders said renewed US strikes linked to Iran dampened hopes of an immediate peace agreement between the two countries, boosting demand for the US dollar as a safe-haven currency.
At the interbank foreign exchange market, the rupee opened at 95.60 against the greenback but later slipped to 95.78, down 8 paise from its previous close of 95.70.
The domestic currency had settled 44 paise lower in the previous trading session.
Crude oil prices remained elevated amid concerns over escalating tensions in West Asia. Brent crude, the global oil benchmark, was trading at around USD 98.09 per barrel despite marginal fluctuations in futures trade.
CR Forex Advisors Managing Director Amit Pabari said the rupee weakened after optimism surrounding an immediate US-Iran peace deal faded.
“Reports of fresh US strikes on Iran and delays in negotiations kept markets cautious, even though investors still expect a broader resolution eventually,” he said.
Market participants are now closely watching the upcoming Reserve Bank of India Monetary Policy Committee meeting scheduled from June 3 to June 5.
According to Pabari, markets remain divided over whether the RBI would announce a rate hike or maintain status quo, while the central bank could also focus on currency stability alongside inflation management.
“With the RBI already using various tools to manage rupee volatility, interest rates may also become part of a broader strategy to attract inflows into the system,” he added.
Meanwhile, the dollar index, which tracks the strength of the US dollar against a basket of six major currencies, was trading marginally lower at 99.09.
On the domestic stock market front, the Sensex rose 127.83 points to 76,137.53 in early trade, while the Nifty gained 36.45 points to reach 23,950.15.
Foreign institutional investors (FIIs) sold equities worth Rs 2,407.87 crore on Tuesday, according to exchange data.